Consider benefits of greed

If we have learned one thing from this latest recession, it is
that greed is bad. Even though the recession is technically over,
the unemployment rate is still hovering around 10 percent, and it
is all because of greed. In particular, those greedy bankers
offered those greedy loans and mortgages and that greedy former
President George W. Bush gave those greedy rich people those greedy
tax breaks. Don't forget about those greedy regulators who spent
the past decade deregulating everything in sight. All those
politicians who droned on about corporate greed would not lie to
us, the American people, would they?

What is greed? I am not greedy and neither are you. It is only
that other person — that banker, that lawyer, that businessman —
who is greedy. None of us would ever fall victim to the great
temptation of greed. Right? Wrong. Greed is, to paraphrase
economist Milton Friedman, when individuals pursue their own
self-interest. It is perhaps the most common — and complex — human
trait. To be sure, some people are less greedy than others. Mother
Teresa displayed less greed than former President Richard Nixon,
but to point out those rare saints among us does not disprove the
basic point that greed is an innate human instinct.

Greed, contrary to all the rhetoric, did not cause this
recession. Those "greedy" bankers that are so often lampooned and
condemned actually play a vital role in the worldwide economy. They
lend money to entrepreneurs to open new businesses, and those
entrepreneurs hire workers — maybe you or your parents. Bankers did
not suddenly become greedier in the past 20 or 30 years. Banking is
a centuries old profession that is historically dominated by
conservatives. Once they discover a profitable enterprise to engage
in, they are unlikely to change course.

This last recession began with the housing boom and bust when
many homeowners began to default on their mortgages. A large
percentage of those mortgages were subprime. For decades, the
predominate form of mortgages was the 30-year mortgage, which
offered bankers stability and homeowners relatively low interest
rates. If 30-year mortgages offer such stability, why then did
banks develop subprime mortgages in the first place?

If bankers act out of economic self-interest, then politicians
act out of political self-interest. They want to be reelected, and
they want to exert influence over other people. Banks offer
politicians the chance to do both. Politicians can compel and
pressure banks to make loans to lower income people. While it may
seem noble for politicians to want to help poor people, we should
be suspicious of their motives. A politician who can claim
responsibility for your house can lay claim to your vote. A
politician who delivers speeches about "taking on big banks" is
assured to receive applause, but there is nothing heroic or
original in criticizing banks. Moreover, the pressure that
politicians exerted on banks to make riskier mortgages ended up
being highly destructive, and the unemployment rate is evidence of
that.

Are politicians greedy? I do not think there is a single person
who would argue they are not. Is political self-interest somehow
nobler than economic self-interest? Many people act as if it is,
but those who earn a great deal of money do far more to help
society than those who seek reelection. By developing the personal
computer and the accompanying software, Bill Gates did more to end
human suffering than any politician. The facts are that individuals
create wealth by pursuing their own self-interest, and the best way
to end human suffering is to create wealth. By criticizing greed,
we may feel morally superior, but pursuing economic self-interest
has done more for humanity than pursuing political
self-interest.

Why do people engage in such demagoguery against banks and other
financial institutions? Maybe they are unaware of all the benefits
they offer society or maybe they are jealous of their successes.
While ignorance and jealousy probably do account for some of the
hostility, I believe the true answer lies elsewhere. In all aspects
of life, there are people who seek to assert their control over
others. When you are young, there are bullies who steal your lunch
money, and when you are older, there are do-gooders who believe
that only they have the wisdom and the insight to lead and organize
all of society. They establish rules about how to raise other
people's children, about where they are allowed to smoke and about
what they are allowed to eat. They order us to buy health
insurance, but only the health insurance they deem to be
acceptable. They instruct banks whom to lend to and how to
function, and then they turn around and criticize bad banking
practices. They are simply interested in controlling others. There
is an infamous road to hell paved with good intentions, and these
do-gooders are paving it with their own greed.

Noah Glyn is a School of Arts and Sciences junior majoring in
economics and history. His column, "Irreconcilable Differences,"
runs on alternate Thursdays.